With the legislative session deadline of March 12 less than three weeks away, House Appropriations Committee Chair Timm Ormsby (D-Spokane) and Senate Ways & Means Committee Chair June Robinson (D-Everett) released their respective 2026 supplemental operating budget proposals. Neither plan strays far from the governor's proposed spending, but the details underneath differ substantially. Here is what you need to know about all three proposals and what they mean for Washington taxpayers.
Governor Ferguson's Budget Proposal
Governor Ferguson released his proposed $79.5 billion supplemental operating budget in late December, framing a $2.3 billion deficit driven by maintenance-level cost increases of $1.6 billion and $700 million in new policy spending.
Key elements of Governor Ferguson’s proposal:
- $797 million in agency spending cuts (6% for cabinet agencies, 3% for universities)
- ~$880 million from the Budget Stabilization Account (rainy day fund)
- End the sales tax exemption for data center equipment ($63 million)
- End the preferential B&O tax rate for prescription drug wholesalers ($26 million)
- Redirect $569 million in Climate Commitment Act (CCA) revenue to fund the Working Families Tax Credit
- Propose a 9.9% income tax on individual income exceeding $1 million, with revenue collection delayed until 2029
The income tax played no role in closing the current biennium's gap under this proposal.
House Budget Proposal
Total proposed spending: ~$79.2 billion (up from the $77.8 billion enacted budget).
Key elements of the House proposal:
- $880 million from the rainy day fund (matching the governor, $130 million more than the Senate)
- 3% across-the-board cuts to agencies with 100+ full-time employees
- ~$400 million for lawsuit settlements and jury verdicts
- Adopts the governor's data center and prescription drug wholesaler tax exemption repeals
- Rolls back the estate tax top rate from 35% to 20%
- Assumes 9.9% income tax generating $2+ billion in 2027-29
- $330 million in CCA funds shifted to the Working Families Tax Credit (less than the governor's $569 million), with $200+ million to the construction budget
- Relies on HB 2034 to terminate LEOFF Plan 1 and transfer $4.5 billion out of the pension system, sending $569 million to the CCA account and the remainder to the Pension Funding Stabilization Account
House Chair Ormsby said the governor's proposal contained "nonviable cuts" to state services and data errors "to the tune of $400 million" in the Health Care Authority. The updated February revenue forecast, which showed an additional $827 million in projected collections, provided what Ormsby called "a little bit of relief" that "basically paid for maintenance level increases and those nonviable options and errors."
Pay attention to the "nonviable cuts" language. The governor proposed 3-6% trims to agency budgets and the House said even that was too much. We are talking about agencies that have seen their budgets grow by double digits every biennium, and the majority could not find 3% to give back. That should tell you how serious the legislature is about controlling spending.
The CCA fund maneuvering is worth walking through because it shows how creative Olympia gets to avoid making actual choices. The governor proposed shifting $569 million in climate dollars to the Working Families Tax Credit. The House partially follows that approach but then raids the LEOFF 1 pension fund to backfill the climate account. So CCA dollars get moved to tax credits, pension dollars get moved to the CCA, and another pot of pension dollars gets parked in a "stabilization" account that the legislature will likely tap for the General Fund next biennium.
The LEOFF 1 raid through HB 2034 deserved its own post, but here is the short version: LEOFF Plan 1 is 160% funded, projected to reach 225% funded by the end of 2027-29, and has been closed to new members since 1977. The House wants to take $4.5 billion from this plan to plug budget holes and backfill a climate account.
This is the second straight session where the majority has gone after the pension systems to cover a spending-driven deficit. Last year, ESSB 5357 raised the assumed rate of return from 7.0% to 7.25% and took a four-year holiday from paying down unfunded liabilities in PERS 1 and TRS 1, creating an estimated $6.5 to $7 billion in future costs that did not exist before. This year, legislators are going directly into a retirement trust fund.
I spent over 13 years working in public pension policy, and I can tell you this does not just affect the ~5,945 remaining LEOFF 1 annuitants. Every public employee in Washington should be paying attention, because if the legislature can game assumptions one year and raid trust funds the next, no retirement system in the state is safe when the next deficit shows up.
Senate Budget Proposal
Total proposed spending: ~$79.3 billion (revised NGFO appropriations of $80.1 billion, a 2.9% increase over enacted levels, minus assumed reversions).
The Senate proposal increases NGFO appropriations by $2.286 billion: $1.734 billion at maintenance level, $552 million in net new policy spending.
Key elements of the Senate proposal:
- $750 million from the rainy day fund ($130 million less than the governor and House)
- $375 million swept from the public works assistance account
- All capital gains revenues in 2025-27 redirected to the NGFO ($395 million)
- $113.9 million in new revenue for 2025-27 and $2.319 billion for 2027-29, including:
- Income tax on millionaires ($2.342 billion in 2027-29)
- Full repeal of all data center tax exemptions ($93.3 million / $210.4 million, broader than the governor's proposal)
- Increased B&O taxes on prescription drug resellers ($26.5 million / $154.6 million)
- Insurer tax clarification ($55.6 million / $17.2 million)
- Cigarette and nicotine tax changes ($20 million in 2027-29)
- Partially offset by rolling back estate tax rates ($44.8 million / $389.9 million) and exempting certain programs from sales tax on services ($15.2 million / $33.7 million)
- ~$1 billion for lawsuit payouts (more than double the House allocation)
- Does NOT redirect CCA revenue to the Working Families Tax Credit. Sen. Robinson called this "very unpopular within our caucus" and "not what people want that money to be used for."
- Does NOT include the LEOFF 1 pension fund transfer
Looking at the Senate's four-year outlook shows how fragile our budget has become. Total reserves at the end of 2025-27 would sit at just 3.2% of revenues, which is dangerously thin for a state that regularly sees billion-dollar swings in its revenue forecasts. The budget shows a negative $917 million ending balance in fiscal year 2028 before climbing back into the black in 2029, and the only reason it climbs back is because the income tax is assumed to start collecting revenue by then. As the Washington Research Council noted, without income tax revenues the Senate budget would leave an ending balance of negative $3.029 billion in 2027-29.
So, the entire four-year balance depends on an income tax that conflicts with Initiative 2111, that voters have rejected 11 times, and that will almost certainly face both a legal challenge and a ballot measure. If any of those efforts succeed, the state is looking at a shortfall larger than the one lawmakers are scrambling to close right now.
House vs. Senate: Key Differences
While House Majority Leader Joe Fitzgibbon said the two chambers are "more aligned than they have been at this stage in past years," several notable differences remain:
- Rainy day fund: House withdraws $880 million; Senate takes $750 million
- Lawsuit payouts: Senate allocates ~$1 billion; House provides ~$400 million
- CCA/Working Families Tax Credit: House shifts $330 million in CCA dollars to tax credits and uses the LEOFF 1 pension raid to backfill. Senate leaves CCA funds alone entirely
- LEOFF 1: House depends on HB 2034's $4.5 billion pension transfer. Senate does not
- Data center exemption: Senate repeals all data center exemptions; governor and House only proposed ending the refurbishment portion
- Higher education: Both include tens of millions in cuts to UW and WSU
What This Means for Taxpayers
The important thing to focus on is what neither proposal includes. There is no spending cap in either budget. No serious effort to unwind the programs and commitments that grew the state's total operating budget 66% since 2019 and caused today's shortfalls. Both chambers are negotiating over which combination of fund transfers, tax increases, and reserve drawdowns will paper over the gap, but neither one is asking why the gap keeps showing up in the first place. Until Olympia addresses the spending trajectory, these budget fights are just going to keep getting worse every biennium.